Motorola Mobility LLC v. Au Optronics Corp.
| Decision Date | 12 January 2015 |
| Docket Number | No. 14–8003.,14–8003. |
| Citation | 775 F.3d 816 |
| Parties | MOTOROLA MOBILITY LLC, Plaintiff–Appellant, v. AU OPTRONICS CORP., et al., Defendants–Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Opinion, 773 F.3d 826, amended and superseded.
Thomas C. Goldstein, Goldstein & Russell, P.C., Washington, DC, for Plaintiff–Appellant.
Carl L. Blumenstein, Farschad Farzan, Christopher A. Nedeau, Nossaman LLP, William Farmer, Farmer Brownstein Jaeger, LLP, Gary Halling, Sheppard, Mullin, Richter & Hampton, Allison Ann Davis, Davis Wright Tremaine LLP, San Francisco, CA, Kirk Christopher Jenkins, Sedgwick
LLP, Terence H. Campbell, Cotsirilos, Tighe & Streicker, Poulos & Campbell, E. Murphy, Jr., Murphy & Hourihane LLC, Nathan P. Eimer, Eimer Stahl LLP, James A. Morsch, Butler, Rubin, Saltarelli & Boyd, Daniel Cummings, Rothschild, Barry & Myers, William Yu, Lewis Brisbois Bisgaard & Smith LLP, Chicago, IL, Robert D. Wick, Jeffrey M. Davidson, Robert A. Long, Jr., Derek Ludwin, Covington & Burling LLP, Kenneth A. Gallo, Craig A. Benson, Joseph J. Simons, Paul, Weiss, Rifkind, Wharton & Garrison LLP, Christopher M. Curran, White & Case LLP, Washington, DC, Jason M. Bussey, Palo Alto, CA, for Defendants–Appellees.
Before POSNER, KANNE, and ROVNER, Circuit Judges.
Back in March we granted the plaintiff's unopposed petition for leave to take an interlocutory appeal pursuant to 28 U.S.C. § 1292(b) from an order granting partial summary judgment in favor of the defendants (which include Samsung, Sanyo, and several other foreign companies besides AU Optronics), thereby extinguishing most of the plaintiff's case. The district judge certified the order for an immediate appeal. We agreed to hear the appeal, and without asking for further briefing or oral argument affirmed the district court's decision in an opinion, reported at 746 F.3d 842 (7th Cir.2014), that we later vacated, ordering rehearing and directing further briefing and oral argument, now complete. We have also granted several requests for permission to file amicus curiae briefs, including a brief from the Department of Justice and briefs from foreign countries worried about the implications of Motorola's suit for their own competition policies.
Motorola, the plaintiff-appellant, and its ten foreign subsidiaries, buy liquid-crystal display (LCD) panels and incorporate them into cellphones manufactured by Motorola or the subsidiaries. The suit accuses foreign manufacturers of the panels of having violated section 1 of the Sherman Act, 15 U.S.C. § 1, by agreeing with each other on the prices they would charge for the panels. Those manufacturers are the defendants-appellees.
The appeal does not concern all the allegedly price-fixed LCD panels. About 1 percent of the panels sold by the defendants to Motorola and its subsidiaries were bought by, and delivered to, Motorola in the United States for assembly here into cellphones; to the extent that the prices of the panels sold to Motorola had been elevated by collusive pricing by the manufacturers, Motorola has a solid claim under section 1 of the Sherman Act. The other 99 percent of the cartelized components, however, were bought and paid for by, and delivered to, foreign subsidiaries (mainly Chinese and Singaporean) of Motorola. Forty-two percent of the panels were bought by the subsidiaries and incorporated by them into cellphones that the subsidiaries then sold to and shipped to Motorola for resale in the United States. Motorola did none of the manufacturing or assembly of these phones. The sale of the panels to these subsidiaries is the focus of this appeal.
Another 57 percent of the panels, also bought by Motorola's foreign subsidiaries, were incorporated into cellphones abroad and sold abroad. As neither those cellphones nor their panel components entered the United States, they never became a part of domestic U.S. commerce, see 15 U.S.C. § 6a, and so, as we're about to see, can't possibly support a Sherman Act claim.
Motorola says that it “purchased over $5 billion worth of LCD panels from cartel members [i.e., the defendants] for use in its mobile devices.” That's a critical misstatement. All but 1 percent of the purchases were made by Motorola's foreign subsidiaries. The subsidiaries are not Motorola; they are owned by Motorola. Motorola and its subsidiaries do not, as it argues in its opening brief, function “as a ‘single enterprise.’ ” And from this we can begin to see the oddity of this case. If a firm is injured by unlawful acts of other firms, the firm may have a cause of action against the injurers but the firm's owner does not. The victims of the price fixing of LCD panels were Motorola's foreign subsidiaries. Motorola itself, along with U.S. purchasers of cellphones incorporating those panels, were at most derivative victims.
The district judge ruled that Motorola's suit, insofar as it relates to the 99 percent of panels purchased by the foreign subsidiaries, is barred by 15 U.S.C. §§ 6a(1)(A), (2), which are sections of the Foreign Trade Antitrust Improvements Act, 15 U.S.C. § 6a. That act has been interpreted, for reasons of international comity (that is, good relations among nations), to limit the extraterritorial application of U.S. antitrust law. Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An Analysis of Antitrust Principles and Their Application ¶ 273c2 (3d ed.2006). Sections 6a(1)(A) and (2) provide that the Sherman Act “shall not apply to conduct involving trade or commerce (other than import trade or import commerce) with foreign nations unless ... such conduct has a direct, substantial, and reasonably foreseeable effect ... on trade or commerce which is not trade or commerce with foreign nations, or on import trade or import commerce with foreign nations,” and also, in either case, unless the “effect [on import trade or domestic commerce] gives rise to a claim” under federal antitrust law. See, e.g., F. Hoffmann–La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 161–62, 124 S.Ct. 2359, 159 L.Ed.2d 226 (2004); Minn–Chem, Inc. v. Agrium, Inc., 683 F.3d 845, 853–54 (7th Cir.2012) (en banc).
It is essential to understand that these are two requirements. There must be a direct, substantial, and reasonably foreseeable effect on U.S. domestic commerce—the domestic American economy, in other words— and the effect must give rise to a federal antitrust claim. The first requirement, if proved, establishes that there is an antitrust violation; the second determines who may bring a suit based on it.
Had the defendants conspired to sell LCD panels to Motorola in the United States at inflated prices, they would be subject to the Sherman Act because of the exception in the Foreign Trade Antitrust Improvements Act for importing. That is the 1 percent, which is not involved in the appeal. Regarding the 42 percent, Motorola is wrong to argue that it is import commerce. It was Motorola, rather than the defendants, that imported these panels into the United States, as components of the cellphones that its foreign subsidiaries manufactured abroad and sold and shipped to it. So it first must show that the defendants' price fixing of the panels that they sold abroad and that became components of cellphones also made abroad but imported by Motorola into the United States had “a direct, substantial, and reasonably foreseeable effect” on commerce within the United States. The panels—57 percent of the total—that never entered the United States neither affected domestic U.S. commerce nor gave rise to a cause of action under the Sherman Act.
If the prices of the components were indeed fixed, there would be an effect on domestic U.S. commerce. And that effect would be foreseeable (because the defendants knew that Motorola's foreign subsidiaries intended to incorporate some of the panels into products that Motorola would resell in the United States), could be substantial, and might well be direct rather than “remote,” the word we used in Minn–Chem, Inc. v. Agrium, Inc., supra, 683 F.3d at 856–57, to denote effects that the statutory requirement of directness excludes.
The price fixers had, it is true, been selling the panels not in the United States but abroad, to foreign companies (the Motorola subsidiaries) that incorporated them into cell-phones that the foreign companies then exported to the United States for resale by the parent company, Motorola. The effect of fixing the price of a component on the price of the final product was therefore less direct than the conduct in Minn–Chem, where “foreign sellers allegedly created a cartel, took steps outside the United States to drive the price up of a product that is wanted in the United States, and then (after succeeding in doing so) sold that product to U.S. customers.” Id. at 860 (emphasis added). But at the same time the facts of this case are not equivalent to what we said in Minn–Chem would definitely block liability under the Sherman Act: the “situation in which action in a foreign country filters through many layers and finally causes a few ripples in the United States.” Id. In this case components were sold by their manufacturers to the foreign subsidiaries, which incorporated them into the finished product and sold the finished product to Motorola for resale in the United States. This doesn't seem like “many layers,” resulting in just “a few ripples” in the United States cellphone market, though, as we'll see, the ripple effect probably was modest. We'll assume that the requirement of a...
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